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Thursday, October 19, 2017

Deepavali Retail Sales – Less Fire, more Smoke

The
week leading up to Deepavali was perhaps the most exciting times for Retailers.
From Apparel to Consumer Durables, Motor cycles to Cars, people would flock to
Retail Stores with their savings of the year. The period around Deepavali,
which normally comes in the latter half of October or early November and the
entire 3rd Quarter of a financial Year would contribute over 50% of
Retail Sales for certain categories like Television sets, Refrigerators, Washing
Machines etc. This was the trend through the 90s and the new Millennium.

Cut
to mid-2000s, the evolution of Mall culture in India has been rapid, with over
1,000 functional shopping centers across the country. For every 3 new malls
that open, 1 perishes and the trend is worse in certain cities, which were
over-hyped by the Real Estate fraternity. The good part of Malls is that they
provide customers 365-day access to regional, domestic and international
brands. The footfalls used to be far higher in Malls a decade back than today –
in act, today it has halved on an average to say the least. Since the prevalence
of E-Commerce over the past 5 years, there has been all round the year discount
on Electronics and Apparel which means customers are shopping more online than
before, while the overall market growth has been tepid with Organized Retail
registering a CAGR of 6-7% over the past few years. After MRP adjustment due to
Inflation, there is hardly any positivity on the bottom-line numbers and
Retailers have been struggling over the past few years. The Balance sheet has
been strained a lot and to keep the monthly and quarterly Sales numbers looking
up, Retailers have been offering various incentives to Customers all through
the year.

The
fight-back from Offline Retailers against Online Retailers has been merely on
the price front which E-tailers have been managing all the while thanks to Wall
Street funding in billions in the sector in India. That no E-Commerce company
has been profitable in a decade (almost) nor have they been sold / acquired at
a premium says a story that’s still unfolding.

So I
set out this Deepavali to various retail stores to see what’s brewing and how
the market is operating. The Offline Retailers are a worried lot. Fewer people
are coming to their stores and even fewer are actually shopping. The bill
values have halved in 5 years with customers picking lesser number of garments
per bill. Consumer Durables retail is even worse with round the year launch of
new models, availability across modern retail chains and low prices through the
year. The best was saved for electronics, perhaps. I walked in to a retailer of
mobile phones and enquired for an iPad. To my shock and surprise, he suggested
I buy it online since the prices are far lower than his procurement prices.

Deepavali Retail Sales 2017 has been more smoke
than fire, I guess. Local Retailers have taken full page Ads making Vinit Jain &
Co. richer by a few hundred crores but the desired result is obvious that it has
not translated in to incremental Sales. Smaller Retailers, with less than 3
shops are even more worried due to liquidity, cash crunch and rising debts. I
never imagined that Retail would see such a gloomy period, but this is only
getting more real.

I am a Retail professional with over 18 year's experience. Started My Retail Journey scopping Ice-Cream at Baskin Robbins' first outlet in Chennai in 1997, have played a miniscule role in the Great Indian Retail Story which is yet to be fully told. Have worked with RPG Retail and The Future Group in Managerial roles. Set-up the first ever organized Retail business at Bangalore International Airport in 2006. Was responsible for setting up and operating 140 outlets for Cafe Coffee Day and 160 outlets for Royal Enfield. Visiting Faculty at B-Schools of repute since 2005. Been an Entrepreneur since Aug. 2014. Now running two start-ups.